Re-Underwriting Failed PE Exits as New Deals

Key Takeaways

• Brian Cassidy points out that close to 50% of sale processes fail even during strong market conditions, meaning broken processes are a standard feature of dealmaking rather than rare errors.
• Alexis Underwood of Wynnchurch argues sponsors must treat a failed process as a new investment decision, discarding defensive postures to re-underwrite the asset from scratch.
• Riccardo Basile notes that across his 11 years at Permira, multiple broken exit processes never prevented the firm from executing successful sales two to three years down the road.
• Extending the hold period creates time for previously deferred operational projects, including ERP system overhauls, pricing architecture builds, and revenue operations redesigns.

The Normalization of Broken Processes

Private equity sponsors treat a busted auction like a failure of execution or an unpredictable macro shock. Brian Cassidy challenges that assumption directly. “I think every time you go through a sales process, you need to be eyes wide open because I think even in the good times, I think close to 50% of sale processes fail,”▶ 2:14 Cassidy observes. “And so there are a lot of failed processes out there, and I think it's important to try to learn from that if there are lessons to be learned.”▶ 2:23

Accepting that roughly half of all sales fail reframes the problem. Sponsors often exhaust management teams trying to push an asset across the finish line when buyers have clearly walked away. Riccardo Basile reflects on a similar dynamic across his tenure at Permira. “It's about finding a way of actually exiting the business,”▶ 24:53 Basile explains, “and I can think of a number of failed exits that have happened over the past 11 years that I've been at Permira, but none of them has then stopped us from selling the business two years, three years later.”▶ 24:57

Resetting the Underwriting Desk

The immediate instinct after a broken process is defensiveness. Deal teams blame financing markets, rate volatility, or buyer skittishness. Alexis Underwood of Wynnchurch views that response as counterproductive. “I like to treat it like a new investment decision, not like a failed event,”▶ 2:48 Underwood says. “I think the worst reaction is kind of defensiveness or trying to force a process that the market's clearly rejecting, and I think you do start with diagnosing it honestly.”▶ 2:51

Diagnosing the issue honestly requires running the exact diligence the firm would perform on an outside buyout candidate. “Sometimes I think the most valuable thing a firm can do after a failed process is to step back and almost, like, effectively re-underwrite that asset internally and say, 'If we bought this business today, what would our value creation plan be now?'”▶ 3:12 Underwood argues.

This mental reset separates the deal team from sunk costs. It turns an awkward extended hold into a clean multi-year thesis with its own target metrics, capital expenditure budget, and growth path.

Funding Deferred Heavy Lifting

During year four or five of a standard hold, deal teams routinely avoid major software rollouts or corporate restructurings. They do not want to incur short-term disruption, margin contraction, or execution risk right before taking a company to market. Once the exit stalls, that constraint disappears.

“Late-hold investments can still create enormous value,”▶ 3:37 Underwood points out. “Things like an ERP implementation that you, like, didn't wanna do, but maybe this gives you the time to do it, or pricing infrastructure, rev ops capability, management upgrades.”▶ 3:40

When a sponsor accepts a two- to three-year extension, the investment committee can greenlight core operational changes that prospective buyers previously flagged as deficiencies. Upgrading pricing systems and rebuilding go-to-market teams directly fixes the quality of earnings issues that spooked bidders in round one. The asset returns to market not as a tired business on a second pass, but as a cleaner, modernized enterprise with institutional governance.

Why It Matters

This approach signals a broader acceptance of lengthened holding periods across private markets as valuation multiples compress and LP distributions slow down. Sponsors can no longer rely on quick multiple expansion or surface-level margin cuts to achieve their target returns. The top-performing firms now treat failed sale processes as capital allocation resets, using additional operational time to fix structural deficiencies before returning to market.